There was never any doubt that the coalition would come good on its promise to privatise Royal Mail. Where others have tried and failed, including Labour’s Peter Mandelson, the current incumbents at the Department for Business are ready to push out thousands of prospectuses.
Whether or not there will be any postmen working to deliver them is another matter. The Communication Workers Union is planning a strike, pitching the workforce against its employer and the government.
So one of the last great battles to transform a public utility into a private business is about to be fought. Quite needlessly. The union should not treat this as a 1980s-style ideological transition, nor a convenient means for a deeply-indebted government to raise funds. A massive restructuring led by Royal Mail chief executive Moya Greene has put the organisation in profit but now it requires an injection of capital to enable it to compete.
Some have argued that the government could raise the required capital at a far cheaper rate than any private investor, but why should public services be denied taxpayer funds in order to subsidise a postal business? Furthermore, in private hands the Royal Mail would be free from political interference.
The 150,000-strong workforce should embrace the change. They will be handed a 10 per cent stake in the business and the shares will be worth about £2,000 to each member of staff who will be able to apply for at least £500 worth of additional shares.
Such is the sensitivity of the switch into private ownership that the government has imposed strict restraining orders on itself, including a legal commitment to retain the universal service obligation which guarantees the same price for delivery between any two points in the UK. This is a dearly loved principle, but one that comes at a price. Critics of the privatisation process will be watching for any hint of a weakening in any such commitment.
Aside from a return to profitability, the government has removed a big obstacle to a sale by taking the £12 billion pensions deficit on to its own balance sheet. So the taxpayer will shoulder the burden of the pensions liability, a controversial move, but one which will heighten Royal Mail’s appeal to investors.
A long list of companies are coming to market in the coming months, including Barclays, Lloyds Bank, TSB and probably W&G Bank (the soon to be disposed of parcel of Royal Bank of Scotland branches). The pick up in flotations is giving a lift to the corporate finance market, with £7.8bn expected to be raised this year, a 9 per cent rise on last year, the second worst year in the last 15.
This year’s tally is still way behind the record £25.6bn of shares sold in 2006 but the flurry of activity may in itself help to carry Royal Mail over the wire as public opinion gathers behind a post-recession return to a spirit of enterprise. It has been a long time coming.
Scotland’s year of sport off to a flying start
THE launch by United Airlines of direct flights between Chicago and Edinburgh next summer is the first such service and will be targeting golfers and other sports fans destined for Scotland next year.
The Ryder Cup and Commonwealth Games are expected to generate millions for the Scottish economy and the US is a huge target for attracting visitors. This is a significant coup for Team Scotland.